Health Care Spending Crisis Coming; Obamacare Adding Fuel to the Fire

Today’s Congressional Budget Office (CBO) report reiterates the long-standing and obvious fact that there is a health care spending crisis approaching, resulting largely from the structurally flawed Medicare program and made significantly worse by Obamacare’s new unfunded entitlement spending.

The key points:

Medicare spending is unsustainable, but it’s even more unsustainable than the CBO says. The CBO report shows that Medicare spending will be 3 percent of gross domestic product (GDP) in 2013, rising to 4.9 percent of GDP by 2038. While this is a huge problem, when rational assumptions are made, the problem gets much worse. This level of Medicare spending assumes that current law will go into effect, which includes a 25 percent pay cut for Medicare physicians in January 2014 and Obamacare’s over $700 billion worth of Medicare payment reductions over the next decade—both of which, if kept in place, would have a severely negative impact on seniors’ ability to access care.

Medicare has an inevitable demographic challenge that has already begun, and it is going to get much worse. The baby-boomer generation began enrolling into Medicare in 2011 at the rate of 10,000 new beneficiaries per day and will continue to do so until 2030. The number of beneficiaries will grow from about 52 million in 2013 to over 81 million in 2030. This will dramatically increase Medicare spending—a problem that has been forecasted for decades and has been ignored. Medicare needs structural reforms in order to put it on a sustainable spending path.

Obamacare is the single biggest factor driving the growth in mandatory health care spending over the next decade. Obamacare’s exchange subsidies and Medicaid expansion are projected to account for 53 percent of the increase in health care spending through 2023. This means Obamacare’s spending accounts for more than even the aging population and excess health care cost growth.

Worse, as the report states, “about one-fifth of federal spending for the major health care programs in 2023 would finance care for able-bodied nonelderly people.” Indeed, a vast majority of those covered by Obamacare’s Medicaid expansion will be childless adults. This is in conjunction with the subsidization of coverage in Obamacare’s exchanges for those earning up to 400 percent of the federal poverty level (i.e., in 2013, individuals earning up to $46,000 annually and a family of four earning up to $94,000 annually).

As the existing entitlements are still on track to bankrupt taxpayers, Obamacare’s spending additions make matters far worse, to say the least.

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